Q & A: QUERY RELATED TO TDS ON PAYMENT TO TRIBALS

[KIRTI TULSYAN]

QUERY

 

Dear Group Members,

Please help me out on the following issue:
One of my client got a contract in North East region. In that areas,
maximum payment will be made to sub-contractors who are tribals and whose
incomes are exempted u/s 10(26)/10(26aa). Now the Sub-contractors are
saying for non deduction of TDS on there payments as there income is
exempted under respective section.

My questions are:
1. Is it necessary to deduct Tax by the payer as the Income of the
Tribals are exempted, not the payment in tribals areas are exempted from
not deducting tax?
2. Is there any formalities/certificates to take from I.T.
Department?
3. Is there any case laws for not deducting TDS?

Please help me out on the above issues.

Regards,
CA. Roshan Agrawal
93309 80009

 

 

REPLY 1

Before the Gauhati High Court in Sing Killing v. ITO & Ors., 255 ITR 444,
the question was — when the transactions entered into by the petitioner in
respect of the forest lease situated in Sixth Schedule area and income
arising therefrom is exempt from payment of income-tax u/s.10(26) whether
collection of income-tax at source under the provisions of S. 206C was
applicable.
Petitioner, a member of Scheduled Tribe, was granted a lease of a forest
area specified in Sixth Schedule area. The ITO also granted a certificate
to the petitioner certifying that he is not liable to pay income-tax
u/s.10(26).
The Court held that, Entitlement of the petitioner to the benefit of S.
10(26) in respect of transactions arising out of the lease is not in
doubt, S. 206C was not therefore applicable. If the income itself is
exempted, any deduction/collection, on account of income-tax, at source,
would be beyond the powers conferred by the provisions of the Act


Regards,
Pankaj Jhawar
Taxation Department
Magma Fincorp Limited

 

REPLY 2

Dear Mr. Roshan

In my view your client should ask the sub- contractor to produce No Deduction Certificate for TDS issued by the local Income Tax Office certifying that the Payee is tribal and his/her income is exempted u/s 10(26)/10(26aa) of the Income Tax Act.

In absence of this certificate your client can not prove before the Assessing authority that the sub-contractor is a tribal. As such if sub contractor is not in a position to provide certificate from local I T Office your client should deduct full TDS as per rule.

Regards,

CA. Sushil Kumar Sultania

 

REPLY 3

 

Dear Mr. Agrawal,
Section 10(26) provides for exemption of income to persons in Schedule VI
area. Persons responsible for deduction of Tax at source are also required
to deduct tax for payment to tribals unless they provide non deduction of
tax certificate from ITO u/s 197 of the IT act.
Respective person have to apply to respective ITO for issue of certificate.
Regards
CA Deb Kumar Dwibedi
9433067639

 

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Best Regards, 
Kirti Tulsyan
B.Com.,ACA,CS


P.D.Rungta & Co. 
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[Anil Jain]

The trbals should obtain non deduction certificate from I T office by making application in form no 13 other wise u have to deduct tax

CA.Anil Jain
Anil Hitesh & Associates
Barak Market 1st Floor
N.S Avenue,Silchar
Pin-788005
Mob: 09435071316
        03842-221678

 

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Date: Mon, 27 Jun 2011 11:42:11 +0530
Subject: [PDRUNGTA] Q & A: QUERY RELATED TO TDS ON PAYMENT TO TRIBALS
From: caktu...@gmail.com
To: foru...@googlegroups.com

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[sanjay mody]

Dear Sir,

In my view if the payment made by an assessee does not comprise any amount which may result in any income or loss taxable under the provisions of the IT Act in the hands of the recepient, question of TDS does not arise. The basic object and purpose of TDS is to facilitated collection of tax which is leviable as per provisions of sec. 4 of the I.T. Act.

If assessee possess sufficient evidence to show that recepient is exempt from tax u/s 10(26), the assessee is not legally obliged to deduct tax out of such payment.

Thanks & Regards

CA Sanjay Mody

Guwahati

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From: Anil Jain <anilj...@hotmail.com>
To: foru...@googlegroups.com
Sent: Mon, June 27, 2011 4:48:16 PM
Subject: RE: [PDRUNGTA] Q & A: QUERY RELATED TO TDS ON PAYMENT TO TRIBALS